BIR Ruling [DA-309-05]

July 6, 2005 BIR RULING [DA-309-05] 109 (k); 127-95 General Milling Corporation 33rd Floor, Export Bank Plaza Gil Puyat corner Chino Roces Avenue Makati City Attention: Cesar G. Avila, Jr. Director for Accounting Gentlemen : This refers to your letter dated June 15, 2005 requesting confirmation of your opinion that the fees paid for services for toll hatching is exempt from value-added tax. It is represented that General Milling Corporation (GMC) is a domestic corporation engaged among others, in toll hatching. As such, its operation includes receiving the eggs from the breeder farms, sorting, fumigating, setting, hatching, sexing of day-old broilers, sorting and packaging for delivery to the contract growers. In reply, please be informed that in BIR Ruling No. 127-95 dated August 25, 1995 the Bureau ruled as follows: "In reply, please be informed that pursuant to Section 9(11) of Revenue Regulations No. 5-87, implementing Section 103(k) of the Tax Code, as amended, agricultural contract growers, referring to those producing for others poultry, livestock or other agricultural and marine food product in their original state, are exempt from VAT. Toll hatching which is described as a package of services such as receiving eggs from the breeder farm, sorting, fumigating, setting, hatching, sexing of day old broilers, sorting and delivery to other contract growers; and toll processing which is described as a package of services including receiving of live broilers from contract growers, weighing, killing, dressing, delivery and packing for sale come within the purview of services of agricultural contract growers which are exempt from VAT pursuant to Section 103(k) of the Tax Code, as amended, and as amplified by Section 9(11) of Revenue Regulations No. 5-87, as amended." It is worthy to note that the Section 103(k) stated in the abovementioned ruling has been renumbered to Section 109(k) pursuant to the Tax of 1997 and further renumbered as Section 109(F) with the enactment of Republic Act No. 9337. Notwithstanding all the amendments, the provision that the "services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar" has always been maintained. IDSETA Considering that the circumstances surrounding your case are similar to the facts presented upon which the foregoing ruling was rendered, this Office hereby confirms your opinion that fees paid for services for toll hatching is exempt from VAT. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group